The Prominence and Dominance of the App Business Model

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By Harriette Halepis

The creation of mobile apps largely dominated business models in 2011. This year, mobile apps are still important in addition to the creation of mobile advertising.

2011 proved to be the year of the mobile app. With hundreds of thousands of apps surfacing on the Apple and Android platforms (not to mention BlackBerry, Windows, and others), businesses began to view mobile app creation as a viable business model -- a business model that gaming companies and retailers alike quickly pursued.

As small and large businesses alike watched the success of companies like Pizza Hut and eBay in using mobile apps, the creation of an app became a necessary part of business marketing or a new piece of the product platform. In addition to the building of an app, companies had to decide whether to create an app that was focused on building brand recognition or generating revenue. The difference between the two app models became clear as most businesses chose one route or the other. Some successful apps (Pizza Hut, for example) managed to combine the best of both worlds.

In addition to the business vs. brand question, companies in 2011 were also faced with another important app decision: Apple or Google? Developing an app for both platforms meant investing a lot of cash (more than $90,000), though it also meant reaching a large portion of the mobile market (more than 23% according to Mashable). App templates also surfaced during 2011, and these generic apps gave some smaller businesses a chance to compete with the big boys.

Last January, TechCrunch reported that the mobile app market would be worth nearly $25 billion by the year 2015 (based on Gartner data). CNet backed up this projection in a March, 2010 article that estimated the mobile app market “…would be worth more than $17 billion by 2012.” In 2011,Research2Guidance (a mobile analysis company) concluded that the mobile market was worth $20.5 billion - up by $3.5 billion from the earlier Gartner prediction.

What types of apps should investors and businesses consider? This question is largely based on industry, but some apps may prove to be more worthwhile than others. The research firm Gartner published a list of the top app trends to watch in 2012. At the top of that list were money transfer apps, location-based services and mobile search apps. Health, payments, and advertising apps also made the top ten list.

In addition to mobile apps, many forecasters are also predicting the expansion of the average mobile advertising budget. Mobile ad companies (such as Millennium Media) are growing fast and many businesses would do well to consider an investment in the mobile ad space in 2012. Combined with a solid mobile website and a user-friendly (and purposeful) app, the new business model is largely steeped in mobile.

Mobile apps are certainly part of the new business model, but so are mobile ads.